State Street Said in Talks for Bank of Ireland Unit

Scott Powers, chief executive officer of State Street Global Advisors, said in an interview published on Aug. 3 that the index funds specialist is looking for acquisitions to expand actively managed investments and cut reliance on passive funds. Source: State Street Global Advisors via Bloomberg

Aug. 26 (Bloomberg) -- State Street Corp., the third-largest custody bank, is in talks to acquire Bank of Ireland’s
asset-management business, according to three people familiar
with the matter.

Macquarie Group Ltd., which had been in negotiations to
take over the Dublin-based unit known as BIAM, dropped out,
according to two of the people, who asked not to be named
because the negotiations are private. No agreement has been
reached and a sale may take months, said two of the people.

Scott Powers, chief executive officer of the Boston-based
company’s money-management unit, State Street Global Advisors,
said in an interview published on Aug. 3 that the indexing
specialist is looking for acquisitions to expand actively
managed investments and cut reliance on passive funds. BIAM is
primarily an active manager, while State Street is the second-biggest U.S. provider of index funds after BlackRock Inc.

“For a company like State Street that wants to get more
integrated in the active asset-management business, a smaller
manager could be the foundation for building a much larger
product over a five-to-10-year period,” Gerard Cassidy, an
analyst with RBC Capital Markets in Portland, Maine, said in a
telephone interview.

The European Commission ordered the sale of the unit as a
condition of approving a government bailout of Bank of Ireland.
BIAM controlled 25 billion euros ($31.8 billion) of assets as of
April 16, down from 57.5 billion euros in 2004, when it was
Ireland’s largest investment manager.

Active Assets

Less than 5 percent of the $1.78 trillion that State Street
Global Advisors handles for clients is held in traditional,
actively managed stock and bond investments.

Active investing, which can bring in higher fees, relies on
fund managers to select securities based on their own research
or mathematical models. Passive investing seeks to track the
returns of broad markets or industries by following an index.

Carolyn Cichon, a State Street spokeswoman, declined to
comment, as did Dan Loughrey, a Bank of Ireland spokesman, and
Karen Smith, a London-based spokeswoman for Macquarie.

State Street employs about 2,000 in Ireland, according to
the company’s website. In March it opened a facility in Dublin
that will eventually house 1,100 employees, working mostly in
asset servicing.

A completed deal would mark the firm’s first asset-management acquisition since it bought the passive equity
business of Gartmore Investment Management Plc in 2001. The
company made two European acquisitions in the past year in the
asset-custody business.

European Purchases

It purchased Mourant International Finance Administration
in the U.K.’s Channel Islands in April and the securities-servicing unit of Italy’s Intesa Sanpaolo SpA in May.